Author: Shlomi Ben Ishai
If you are looking to buy a property in
Israel this article is for you. There are
number of rules you should follow to ensure
a successful investment.

Rule #1 – Define Your Investment Goals

A clear definition (preferably in writing)
of your investment goals would help you
focus your efforts in the right direction
and optimize your thinking process.
When it comes to real estate investment in
Israel, there are usually three main
categories you should consider:

Residential Property: when you
purchase the property for yourself or
your family to live in.

Vacation Property: when you purchase
the property for vacation purposes. That
means that the property might be used
only a few weeks or months per year, and
remains vacant the rest of the time. In
such case, maintenance aspects should be
considered as well.

Investment Property: when you regard
the property as a money-generating
asset, usually used as a rental property
or fixer-upper projects.

Rule #2 – What Is Your Budget?

This may sound like a trivial thing to do
but you will be surprised how many people
skip this fundamental step. It is important
to clearly define your budget and be well
aware of your financial limits before you
get emotionally tied to a certain property.
That alone can save you loads of money!
There are two aspects to consider:

Rule #3 – Do Your Own Research

Before buying the property it is recommended
that you talk to the local people and learn
as much as you can about the area. The more
you ask the more you know and the less
surprises you will have along the way. Here
are some questions you should bear in mind:

What is the condition of the
property? How much work and effort is
required to meet your goals?

What are the social-economic
characteristics of the population in the
area?

Who are your neighbors?

Recommended schools in the
neighborhood?

Access to major highways and means
of transportation?

What is the potential for a value
increase in the neighborhood?

Check the proximity to the sea,
major cities, tourist attractions and
other places of interest. This will have
an impact on your property value for the
long term.

How far is the nearest shopping
center, family attractions, sports club?
What activities and organizations are
available in the area?

What are the annual taxes you should
expect to pay?

Are there any hidden costs
associated with the property or the
neighborhood that you did not take into
account?

Examine the rentals in the area;
learn about the tenants profile and the
average monthly rental payment for a
similar property.

If Hebrew is not your mother tongue,
see if there are English speakers in the
neighborhood.

If you are a religious person, see
if there are houses of god nearby
(synagogues, churches, mosques).

Think outside the box, address your
questions to people who are not trying to
sell you anything, so you can get the most
honest answers. Listen to your gut feelings
– if it doesn’t feel right, there must be a
good reason for that – don’t rush.

Rule #4 – Understand Your Financing

The next step is to decide how we are going
to finance the purchase of the property. You
can either pay the full amount in cash or,
as most people do, take a mortgage. Nowadays
there are mortgage counselors, and it is
worth consulting with them prior to making a
decision.
All mortgages in Israel are linked to a
particular index or to a foreign currency.
The three principle types of mortgages are:

A mortgage linked to the consumer
price index.

A mortgage linked to the prime rate.

A mortgage linked to a foreign
currency (Dollar, Pound, Euro, etc.).

At this time the average interest for the
various types of mortgages is around 5%-6%.
If you wish to receive a mortgage above
60%-70% of the property value, it is
necessary to purchase insurance for payments
above 60%, generally known as EMI. The cost
of EMI is very high, about 4% of the value
of the loan. Due to its high cost, it is not
recommended.
There are a few other financing costs, which
should be taken into account:

The bank charge for processing the
mortgage is approximately 0.25%.

Life insurance and building
insurance are required.

The cost of registration of the
mortgage/lien in the Land Registry/Lien

Rule #5 – The Devil Is In The Details

Real Estate Lawyer - You
should hire your own lawyer who is
knowledgeable about the city in which you
are buying your home. It is not recommended
to use a friend or family member. Make sure
you never sign a contract with a builder
without a lawyer.Property Inspection - You
should have the property checked by a
licensed and reputable engineer or surveyor
before you sign the contract and receive a
written statement. The cost is approximately
$400-$500 plus VAT, depending on the size of
the property.Sold As Is? There is a
clear distinction between a new and a used
property. Generally speaking, used
properties are sold as is, meaning that the
seller is not obliged to fix flaws unless
otherwise mentioned in the purchase
agreement, whether these are known or hidden
flaws. However, when purchasing a new
property, the contractor is obliged to
provide a three years warranty by law, and
in addition, the civil tort law gives
another 4 years.Purchase Agreement - Before
the purchase agreement is signed it is
desirable that everything has already been
agreed upon so that it is all included in
the contract. It is important to have an
English translation of the agreement as well
as all of the principle documents attached
to it. It is important that the buyer’s
money be protected as required either by
means of registering a caveat or
registration of mortgage or by means of a
bank guarantee.